Image Credit: Alex Nabaum

One of the biggest surprises in the first half of 2020 was what didn’t happen: Most individual investors, despite their reputation as nervous Nellies who sell into every panic, didn’t dump their stocks even when the market meltdown was at its worst.

The typical individual investor is the polar opposite of the gamblers who have been grabbing headlines for day-trading stocks. While some bailed out at the bottom, the vast majority hung steadfast through one of the most frightening bear markets in decades.

That suggests to me that sudden, shocking market declines — like Oct. 19, 1987, when stocks fell more than 20% in a day — are no longer enough to shake small investors out of stocks. The popular belief that stocks will always bounce back has acquired the force of religious faith. Only a bear market lasting for years is likely to be powerful enough to prod investors into questioning that faith…

 

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